Inflation will soar to 4% this winter spelling a cost of living squeeze for millions of families, the Budget predicted today.
Chancellor Rishi Sunak said the Office for Budget Responsibility expects CPI inflation rate will rise from 3.1% in September to 4% over the next year.
It means more prices rises in shops and threatens the first major hike in Bank of England base rates - and therefore mortgage rates - in more than a decade.
But Mr Sunak blamed short-term factors, including the world's recovery from the Covid pandemic - and insisted GDP growth will soar this year to 6.5%, far higher than expected.
He said: "I have written to the governor of the Bank of England today to reaffirm their remit to achieve low and stable inflation.
"People should be reassured they have a strong track record in doing so.
"They have a government here at home, ready and willing to act."
Despite the news Mr Sunak said he expected the economy to return to its pre-Covid level at the turn of the year, earlier than thought.
And he said unemployment is now expected to peak at 5.2% - lower than the 12% originally expected, 2million fewer people out of work.
He gave the following economic figures:
GDP GROWTH
Year: Today’s forecast (forecast as of March 2021)
- 2021: 6.5% (4.0%)
- 2022: 6% (7.3%)
- 2023: 2.1% (1.7%)
- 2024: 1.3% (1.6%)
- 2025: 1.6% (1.7%)
PUBLIC SECTOR NET BORROWING (AS % OF GDP)
Year: Today’s forecast (forecast as of March 2021)
- 2021-22: 7.9% (10.3%)
- 2022-23: 3.3% (4.5%)
- 2023-24: 2.4% (3.5%)
- 2024-25: 1.7% (2.9%)
- 2025-26: 1.7%
PUBLIC SECTOR NET DEBT (AS % OF GDP)
Year: Today’s forecast (forecast as of March 2021)
- 2020-21: 85.2% (88.8%)
- 2021-22: 85.4% (93.8%)
- 2022-23: 85.7% (96%)
- 2023-24: 85.1% (97.1%)
- 2024-25: 85.3% (97.0%)
Speaking in the packed Commons chamber, Mr Sunak said: “In the year to September, the global wholesale price of oil, coal and gas combined, has more than doubled.
"The pressures caused by supply chains and energy prices will take months to ease.
“It would be irresponsible for anyone to pretend that we can solve this overnight. I am in regular communication with finance ministers around the world and it’s clear these are shared global problems, neither unique to the UK, nor possible for us to address on our own.”
But the Chancellor was keen to pit himself as someone looking out for poorer families as he painted a positive picture about the health of the economy as it recovers from the pandemic.
Mr Sunak said the OBR had forecast a faster bounce back, with growth expected to be 6.5% this year rather than the 4% previously expected.
